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EU Acquired Rights Directive may apply to transfer of client investments to new firm

02 October 2019

In a Slovenian case, the European Court of Justice (“ECJ”) has considered whether the EU Acquired Rights Directive (“ARD”) applied to a situation in which a stock market intermediary ceased operations, but gave its clients the option to transfer their financial instruments and other managed assets to another named intermediary.

Facts of the case

In December 2011, the Slovenian bank Banka Koper ceased performing investment activities, meaning that it would no longer act as a stock exchange intermediary. It agreed to transfer all documentation relating to its investment services and activities to another firm, Alta Invest, in June 2012.

Banka Koper informed its clients that it would be ceasing investment services operations and they could transfer their accounts to Alta Invest free of charge. 91% of Banka Koper’s clients transferred to Alta Invest.

Banka Koper then closed its office for investment services, dismissing all the stockbrokers it employed. One of the dismissed employees, Mr Dodič, contested his dismissal in the Slovenian courts, claiming that there had been a transfer of an undertaking under the ARD and his employment should have transferred to Alta Invest.

Banka Koper contended that the transfer of accounts did not apply to the employees, the business premises or the work tools, and the clients had been able to elect not to transfer to Alta Invest and to choose their new provider of investment services. Under domestic legislation, it had been required to enable the transfer of its clients’ financial instruments and other managed assets to another firm authorised to provide the same services.

The Slovenian Court held that there was no transfer within the ARD as there was no retention of the identity of the undertaking. The fact that almost all of the bank’s clients chose to move to Alta Invest was not sufficient grounds for concluding that there was a transfer of undertaking. Mr Dodič appealed to the Slovenian Supreme Court, which referred various questions to the ECJ for a preliminary ruling.

ECJ’s judgment

The ECJ ruled that the transfer of financial instruments and other client assets could give rise to the transfer of an undertaking under the ARD, with the key question being whether the economic entity retained its identity post-transfer. This was a matter for the national court to determine. The clients’ freedom to choose whether to transfer their securities to Alta Invest or another provider did not preclude a transfer of undertaking.

In order for the definition within the ARD to be satisfied, the ECJ said it had to be established that there was a transfer of clients. In that case, it was necessary to consider the incentives offered to the bank’s clients to entrust the management of their securities to Alta Invest (such as covering fees), and whether the clients had an express choice to transfer their accounts.


Although the ECJ left the key question of whether there was a transfer of an undertaking (or part of an undertaking) for the national court to decide, this case does illustrate how the ARD could apply to the transfer of clients in the financial sector, even in the absence of any other assets or employees transferring. (Hence, in the UK, this could amount to a “traditional” TUPE transfer, as opposed to a service provision change.)

Significantly, even though the ECJ suggested that the number of clients transferring and the client’s ability to exercise freedom of choice over the identity of the new intermediary was not necessarily a determinative factor, it would be difficult to imagine TUPE applying in a situation where clients exercised that choice to transfer their accounts to a variety of different intermediaries.

Dodič v Banka Koper and Alta Invest C-194/18 – judgment available here

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